Protect the Things You Love – Q Report Jewellery Insurance

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Alrosa world’s largest diamond producer by volume – World Federation

JOHANNESBURG ( – While De Beers remains the world’s largest producer of diamonds by value, Russian diamond mining company Alrosa is now the world’s biggest producer by volume, which elevates its importance significantly.

Current economic sanctions against Russia do not extend to diamonds and although there are reports of broader and deeper sanctions being considered, the sanctioning of diamond supply from Russia is not on any current agenda.

“At this stage, nothing is happening to stop diamonds coming out of Russia and let’s hope the situation does not escalate where additional sanctions are imposed.

“It would be an absolute loss to the industry if Russia were not allowed to sell its goods freely,” Ernie Blom, who is serving his third term as president of the World Federation of Diamond Bourses, comments to Mining Weekly Online in the attached video interview.

The US government’s sanctions against Zimbabwe continue to inhibit dollar-based diamond sales from that country, but with European Union sanctions against Zimbabwe lifted, Belgium is now aggressively trying to reverse its loss of market share from the Zimbabwean sanctions, by holding quite a few rough Zimbabwean diamond tenders in Antwerp.

“They’ve seen the need and they’re starting to address it,” says Blom.

The 25 000-member world federation that Blom heads has 30 exchanges in 28 countries and 95% of all the world’s rough and polished diamonds go through these exchanges.

In South Africa, Blom would like to see the government and the cutting-and-polishing industry join hands to halt the industry’s significant decline.

During its diamond heyday, South Africa had 4 500 polishers, a number that has since fallen to fewer than 600.

“There has to be a partnership between government and industry to reverse the trend and start to build up the diamonds industry again,” says Blom, who points out that South Africa’s neighbours to the north and west and other countries have growing diamond industries.

“We can do the same, provided we work,” he reiterates, pointing out that the State Diamond Trader is working under difficult legislative circumstances in having to buy run-of-mine diamonds and sell them to beneficiators who have difficulty in viably polishing cheaper end goods.

By the same token, he is not sure that the mining companies would be happy if legislation were changed and they were forced to sell the cream of their production to the State Diamond Trader and be left with lower-end production.

He sees it as a conundrum that government, the industry and mining houses have to work out together if South Africa is to gain a bigger share of the global diamond-polishing market, which is currently very buoyant.

There has been phenomenal year-on-year growth, driven by the new emerging markets of China and India supplementing the American market plus increased strength in the European market.

“The industry has a fantastic growth potential,” he tells Mining Weekly Online.

Neighbouring Botswana, in creating facilities that are as good if not better than London’s, has customers attending sights every five weeks, which has put Botswana on the map, increased tourism and assisted the country to become a regional hub.

While the federation does not see synthetic diamonds as a threat to the natural diamond industry, its biggest concern is the passing off of synthetic diamonds as natural diamonds. To counter this, it has rolled out machinery and tools that are able to check the authenticity of each and every diamond.

Because diamonds can also lend themselves to money laundering, the federation is putting systems in place to ensure that the concealment of the origins of illegally obtained money cannot be part of the legitimate diamonds trade.

The federation’s system of warranties in 2000 was a forerunner to the Kimberley Process, which Blom says has reduced the sale of conflict diamonds to less than a tenth of a per cent, from being 4% of global turnover prior to its introduction under United Nations auspices.

Tackling Industry Issues: Interview With WFDB President Ernie Blom

With his vast experience in the diamond industry and as President of the World Federation of Diamond Bourses (WFDB), Ernie Blom has a unique insight into the issues affecting the global diamond trade. Blom agreed to discuss these issues with IDEX Online:

What is the state of the polished market currently? Polished prices have increased strongly since the start of the year thus pulling up rough prices to some extent. How is the industry responding and coping with this?

The prices of rough diamonds are cyclical and if one considers the past it is clear that the same patterns repeat themselves year after year; yet our memories are short and we are quick to comment without looking back over the years. I firmly believe that the market remains very buoyant and robust and I have no doubt that at the end of the year we will feel positive about the year that was especially as we approach December which has always been traditionally busier. During the past 12 months we have seen an increase in rough turnover both in volume and value terms. I am concerned that the prices of rough are being inflated due to speculative trading and this remains a major concern for the industry at large.

The issue of liquidity for the industry is still acute. What can be done about this and what can the WFDB do to help?

I want to respond to this question firstly by making a statement that banking institutions remain our “partners” for without them this industry will grind to a halt. Our relationship with the banking industry is of paramount importance and it is the aim of the WFDB to build this relationship. We need to work together to find long term solutions to the financial model and it is my sincere wish to develop this and I would hope that at some point in the near future we can jointly host a summit to develop mutually beneficial structures for future growth.

We, as the diamond industry, must also ensure that we create a sustainable, profitable industry as this would go a long way in securing our growth and the relationship with the financial markets. The lack of profitability in the industry can also be ascribed to the way trade is conducted, namely consignment stock (Memo). When buying rough we pay in hard currency with no credit terms available – it then takes between four to six weeks during the polishing and grading phase before we can put diamonds in the market. At this stage we have already committed capital funds for six weeks and this process is now extended when diamond dealers have to act as “banking institutions” when providing stock to our customers on consignment with payment only due when stock is sold. With this incredibly long extended credit line set against the very tight margins under which we operate, it is no wonder that we, as an industry, lack profitability.

The issue of synthetic diamonds remains a concern for the industry. Is the diamond trade taking it seriously enough, or simply trying to sweep it under the carpet, as some have suggested is the case?

I need to set the record straight; we are not concerned, but rather aware of the role of synthetic diamonds. The WFDB has taken the lead in setting in motion numerous protocols for dealing in synthetic diamonds, i.e. the charter, the declaration on documentation and our stated position of taking action against anybody selling synthetic diamonds without declaring them as such. We would also like to see the diamond grading laboratories across the globe take a standard position on synthetic stones. We, as the WFDB, are not against grading synthetics – in fact, we encourage it. However, it is vital that laboratories differentiate between synthetic and natural diamonds in a very obvious manner, i.e. the color of certification.

The other conundrum we face is nomenclature. The producers of synthetics do not want to use that word and we want a description that will not confuse the consumer, such as cultured. I am willing to find a middle ground. I would also love to engage with the producers on the way forward together.

History has also taught us that if you ignore a potential issue or force it “underground” then you are creating bigger problems downstream. I believe that synthetic diamonds have a share of the market and this will remain and might well even grow. This does not concern us as long as we protect the rights of the consumer and make them aware when purchasing a stone whether it is a natural diamond or a synthetic stone.

Lastly, I want to extend a word of thanks to the GIA who have supplied a synthetic diamond detection machine free of charge to every member Bourse of the WFDB. My thanks also goes to De Beers and the HRD who are both devoting money and time to research and further developing synthetic detection machinery.

The role of the diamond exchange has, inevitably, changed as companies prefer to do business from the privacy of their offices. Are trading floors still relevant to the diamond business?

The diamond industry is a dynamic industry and it has and will continue to evolve as needs change or technology changes. At the same time the industry is a very traditional one and certain “old world” charm issues are still very prevalent, i.e. the trading floor dating back many decades is still relevant and ensures that the industry remains “open door”. The big advantage of a trading floor is that it allows visitors the opportunity to trade in a very convenient manner.

In similar vein, we have seen the emergence of trade fairs being held on trading floors, in Israel, Belgium and New York. What is your opinion of the events? Are they more valuable and relevant to the diamond industry than traditional tradeshows?

As said in the previous paragraph, they remain very relevant and the WFDB encourages its members to host these events and as such allow greater participation by all, including visitors. The WFDB also encourages the development of any initiative from its members. Tradeshows are equally important and the WFDB is working closely with countries to develop participation by its members. The two types of events complement each other and certainly form an important part of our strategy going forward. The WFDB is working with many shows to develop our marketing strategy for the diamond industry.

Ironically, given South Africa’s historic role in the diamond industry, its neighbor Botswana gets many more headlines these days. What is the state of the market in South Africa? Does it promote itself sufficiently as a diamond center? And would it be accurate to say that South Africa taken its eye off the ball as far as diamond beneficiation is concerned?

Historically speaking, South Africa was certainly one of the top diamond centres in the world, but we have seen a big decline in local polishing with more diamonds being exported to other cutting and polishing centres around the world. The decline in the local industry is certainly a reality and it does strongly reflect on the cutting and polishing sector. Having said this, South Africa still has a very vibrant diamond trading sector. The decline in local cutting and polishing now means that the country has become an importer of polished stones for its local market needs.

In order to resuscitate the South African market from a cutting and polishing point of view, we would need government intervention and support as partners to help develop a vibrant industry covering all aspects of the value chain. Many skilled people have been lost to markets like Botswana and the country would need to step up training and job creation opportunities.

Similarly, can South Africa benefit from the growing power of Botswana’s diamond industry?

Currently the opportunities created in Botswana are not fully exploited by South Africa. Gaborone does not have international flights arriving directly from the large markets, which means that most of the visitors pass through South Africa on their way to tenders.

This creates major opportunities that need to be exploited for the benefit of South Africa and the southern hemisphere countries as a whole. The diamond sector can greatly benefit from making South Africa a stopover. Furthermore, the tourism industry can also be bolstered by these visits.

Tenders have, for around the past decade, been a point of contention in the diamond business. Proponents say they promote transparency, while opponents claim they essentially only help producers by boosting prices and preventing small and medium size firms from taking part due to their relative lack of financial clout. Where do you stand on the issue?

The tender system was started in South Africa many years ago by both larger and junior mining houses which then evolved into global tendering businesses. The tender system is now firmly in place and provides mining houses with a comfort level of achieving top dollar when selling stones.

I personally enjoy the relationship we, as diamantaires, have with producers and miners/diggers as it adds color and character to our trade, yet I understand that things change. I do, however, believe that this system will not be disappearing any time soon. Holistically, it does offer all buyers the opportunity to submit bids and if the price is right, the highest bidder will receive what was bid on. Unfortunately, the system is not without flaws. At these tenders, we pay up front which means that the diamantaire becomes a credit facility while the stones are cut, polished, graded and sold. This timeline has a major impact on cash flow in our businesses. A further potential problem with the tender system is that it could be exploited for profiteering by individuals or companies with large financial resources.

Finally, on a personal note, how did you start out in the diamond industry? What led you to become involved in public service which, necessarily, requires a lot of your time and attention, is done on a voluntary basis, and takes you away from your business?

I am a third generation diamantaire; my grandfather entered the industry in the 1800s. My son, who is a vital part of my business, will be the fourth generation from our family. At the early age of 23 I became a shop steward with the trade union South African Diamond Workers Union (SADWU). At SADWU I rose through the ranks to become the youngest vice-president and a strike leader in the mid-1970s.

I have served on a range of industry bodies as an executive and chairman for many years, including:

  • Diamond Dealers Club of South Africa (DDCSA) – 12 years – Chairman
  • Rough Diamond Dealers Association (RDDA) – 17 years – Chairman
  • Master Diamond Cutters Association (MDCA) – 4 years – Chairman
  • Jewellery Council of South Africa (JCSA) – 7 years – Chairman
  • South African Diamond Board (SADB) – 26 years
  • World Federation of Diamond Bourses (WFDB) EXCO – 12 years
  • President of the WFDB for third term
  • Special Diplomatic Advisor to the Belgium government on trade with Africa

My roots have always been firmly entrenched in community-based issues and I am a strong believer in giving back to society as is evident with my involvement with the wildlife preservation industry bodies and many other charities I am involved with.

Giving back is something that is very close to my heart. I don’t do it because I have to – I do it because I want to do it and enjoy doing it.

Australia receives diamond detection machine from GIA

The GIA has made a synthetic diamond detection machine available to the DDCA in Australia. It will be operational in October 2014, and free to use for DDCA members.

The only one of its kind in Australia, the machine will be located at the Gem Studies Laboratory in Sydney, under the care of Bill Sechos.

Opportunities for DDCA and Jewellery Industry

The following is an interview with DDCA President Rami Baron, published in the Jan/Feb issue of Jewellery World

What were the biggest highlights for the DDCA in 2013?
The biggest achievements in 2013 were not so much in Australia but on the international stage where the DDCA was recognised as a major contributor to the future growth of the world diamond industry through its contributions to the World Diamond Mark marketing campaign. The World Diamond Mark is a generic marketing campaign which is non-brand specific but looks to bring all sectors of the trade together. It is the most exciting marketing campaign to be launched by the diamond industry since De Beers brought us ‘Diamonds are Forever’.

What challenges has the DDCA faced in the same period?
Like every organisation and trade body, the DDCA (a non-profit organisation) has found it difficult to galvanise members as everyone is so busy with their own businesses.
The good news is that although I understand this mind-set, I (and a few others) don’t subscribe to it.
We take the attitude that if we can make a difference and can help to effect change, then we will do so.

What do you think are the biggest challenges currently facing the jewellery industry?
In the diamond trade the wholesaler must come up with a greater value proposition to the retailer otherwise both sides will suffer.
We are being forced to reinvent ourselves – it’s no longer just price or even availability of goods because in 2 hours you can now bring almost any stone from overseas into the country.
I think the issue of synthetic diamonds could also be a real problem for our industry as very few are even aware of the proliferation of them and the difficulty in identifying them.
Larger synthetics are coming into the market and if the wholesaler or retailer is caught out, they will be personally responsible.
The flip-side to that is synthetics expand the industry offering by making it more affordable for consumers to own a diamond-like stone.
The critical aspect is that there must be full disclosure.
In addition the web is getting stronger and its happening faster- how are you using it?
If you think you don’t need the internet and you can just do your own thing, then my response is simple: If you are making money and your business is growing, and more importantly you have a great quality of life, then don’t look left or right, just stay on course, because this formula works for you, and that’s all that matters.
If however you are going financially backwards then move and move fast to learn (or hire those who have the knowledge) how the web and social media can be part of your business.

What do you think are the biggest opportunities in the industry?
We live in amazing times.
A small bench jeweller is no longer restricted to his suburb; he or she can create a website, watch a bunch of YouTube videos on optimisation, and reach out to the world.
He or she can create their own YouTube channel and showcase their creativity all with little more than an iPhone video and some clever editing.
Today we can look at the best designs of jewellers to get inspiration all over the world whilst sitting at our desk.
We can join specialist chat groups, read blogs and speak to others in the industry to share ideas and collaborate.
In my eyes this is bigger than the industrial revolution.
It all starts from desire and allocating time to reach out.
It’s not easy and it takes effort but the access to information and opportunity has no limits.
If you are ambitious this is your ideal time to take advantage of change.
The biggest opportunity in our industry is the realisation that one must find a niche and be the best at it -you can own that space (and not just in your city) because the web has no borders.

What are the DDCAs plans for the year ahead?
Adam Selikman, the vice president of the DDCA, and I have embarked on an ambitious project to redraft the club’s constitution to make it more relevant to the Australian market and also find ways to generate a revenue stream which will enable it to begin marketing programs for its members.
We are also very excited that Australia may be one of the first countries in the world where the World Diamond Mark will be launched.
2014 will be a fantastic year for those who are hungry and looking to take advantage of the opportunities and changes coming.

Warranty is NOT Insurance!

WARRANTY is intended to cover consumers for manufacturing defects for a limited time. It’s a guarantee that a product has been made correctly, that you are getting what you paid for.

INSURANCE will cover you for things like accidental damage, malicious damage, and loss and theft.

Understanding these differences is essential, particularly because some consumers are being misled when it comes to warranties, which are absolutely no replacement for insurance.

The ACCC has issued a warning to jewellers about extended warranties. There have been complaints there are some jewellers making claims that an extended warranty has certain benefits when it does not, and that an extended warranty provides additional benefits which consumers are in fact already entitled to.

Australian Consumer Law (ACL) provides consumers with automatic guarantees. Depending on the product purchased, these guarantees could last beyond any warranty provided.

Several business have been taken to court by the ACCC, including Hewlett-Packard Australia, who had been making misleading claims to their customers regarding their rights. This included telling them that the warranty period for HP products was limited to a specific amount of time, and that the customer would have to pay extra to extend this period.

The important thing to remember here is that according to the ACCC, extended warranties should only be offered to consumers if they provide benefits beyond what consumers get automatically under the consumer guarantees. If any business sells extended warranties any less than or the same as what people are already entitled to, it leads consumers to think that they are getting extra benefits when they are not.

This puts an even stronger emphasis on the fact that warranty is no replacement for insurance. Not only is warranty entirely insufficient if you were to lose or damage your new engagement ring or other piece of jewellery, but you can’t even be sure that paying for extra services will make any difference!

The 36th World Diamond Congress in Antwerp

I write this article whilst in Antwerp Belgium as we come to the close of the 36th World Diamond Congress. Without a doubt the highlight for me on this trip was having Gus Hashem, a fellow club member, join me and to see and experience what I have in the past few years and appreciate the high regard in which Australia is held on the world stage. This year I was tasked to run the trade and promotion committee meeting, as the president could not attend. It was not only a great honour but we had a huge turnout of observers, in particular the Minister of Mines and Mining Development of Zimbabwe, the Hon W.K. Chidakwa and a number of his ministers . It was a robust and interesting meeting where we discussed launch of the new WFDB Website and the impact of social media in our industry . The most contentious issue was the unbelievable delays experienced in GIA certification. The numbers are staggering. GIA grades approx 16000 stones per day – not bad for a non profit organisation. The issue is that it can take three months to get merchandise graded, in simple terms, is becoming an untenable situation which requires immediate action. The US Bourse already had discussions with the GIA who admited they dropped the ball and are looking to play catch up as fast as possible. At that point I formed a committee from members of the Israeli, Antwerp, and USA clubs which I took to the board for approval to look to see what could be achieved for the benefit of our members. As we are in ANTWERP, a dialogue with other respectable Labs to provide capacity was initiated. HRD was keen to respond and by the time this article goes to print there should be possible solutions in place.

2014-06-16 21.18.15
Gus Hashem together with (on the left) Gaetano Cavallieri – head of CIBJO and (in the middle) Ernie Blom – WFDB President

In the numerous discussions with the various LABS the verdict is consistent, the degree of synthetic diamonds in the market has been greatly exaggerated. Large companies like Sterling in the USA are testing even one pointers. We had Tom Moses, one of the heads of GIA on a panel where I personally posed the question when and is a tool being developed to test diamonds already set in jewellery. The answer was it’s on the horizon, but no firm commitment was made although he agreed it is critically needed as those who maybe passing off synthetics will not even send the stones to a Lab. Tom and I spoke subsequently and he gave me an undertaking that a synthetic diamond testing machine will be sent to Australia in the coming months. The World Diamond Mark has recorded a major success with the official signing of Istanbul being the launching pad for the pilot of the WDM. The President of Boursa Istanbul flew in for the signing ceremony. Following Istanbul the WDM will continue a secondary program in Dubai. Both these steps bring to fruition a vision which Alex Popov, Suresh Hathirami and myself envisioned to create a generic diamond marketing campaign to ensure the health and growth of the diamond and jewellery market. This dream is coming to reality and it is enormously gratifying.

2014-06-16 21.22.03
Gus, Martin Rapaport and myself during a catch up break.

As usual I caught up with great friends and colleagues from around the world. I can tell you all that under the WFDB IDMA and the World Diamond Council the industry is in good hands and it is highlighted by the integrity and statesmanship of our leader Ernie Blom, President of The World Federation of Diamond Bourses. Trade well.